Paul Ormerod is an economist at Volterra Partners, a visiting professor at University College, London, and author of Positive Linking: How Networks can Revolutionise the World.

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Evidence from the US is that shale increases the prosperity of the area where drilling takes place (Source: Getty)

Paul Ormerod

Leading Welsh politicians seem to be getting ideas above their station.

Fifty years ago, Labour held all but four of the parliamentary seats within the principality, and won over 60 per cent of the vote. In the latest General Election, by contrast, the Conservatives were by a large margin the second party in terms of votes, and came within hailing distance of Labour. They gained three seats and now hold 11 compared to Labour’s 25.

Jones in particular keeps insisting that Wales should not lose a “penny of subsidy”, despite the fact it voted strongly for Leave. Readers in London and the South East will be only too aware of just exactly who is meant to keep handing over the monies.

A paper in the latest American Economic Review by a team from the Ivy League Dartmouth College examines the local economic impacts of fracking in the Unites States. Using detailed data from the Bureau of Labor Statistics and the Internal Revenue Service, they assess not just the overall impact, but how much of any benefits are retained locally.

Their geographic unit of analysis is the US county, which broadly corresponds in Britain to a local authority in terms of their respective average populations. The authors, Feyrer, Mansur and Sacerdote, obtain two main findings.

First, the counties where extraction occurs enjoy significant economic benefits. Second, the effects grow larger as they widen the geographic area being examined. The regional impact on jobs and income is approximately three times as large as the immediate county effect, with most of the impact happening within 100 miles of the drilling sites.

Around 20 per cent of all the total value of gas and oil extracted remains within the specific county where the drilling takes place. Each million dollars of new oil and gas production is associated with a $80,000 increase in wage income and 0.85 new jobs within the county in that year. Roughly 40 per cent of the income increase is in industries not directly related to oil and gas extraction such as construction, hospitality, and local government.

The academics point out that, if a region is at full employment, this additional activity will simply displace rather than add to the total. But during the Great Recession, the US was far from full employment. Fracking added a total of 640,000 extra jobs.

Wales is a long way from being at full employment too. Here is a real chance to boost the region economically, but the politicians put their own right-on images above the interests of the people of Wales.

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